IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 18, 2007
No. 06-20346 Charles R. Fulbruge III
Clerk
MELISSA AMSCHWAND, INDIVIDUALLY AND ON BEHALF OF THE
ESTATE OF THOMAS AMSCHWAND
Plaintiff-Appellant
v.
SPHERION CORP; ET AL
Defendants
SPHERION CORP, INDIVIDUALLY AND AS PLAN ADMINISTRATOR OF
THE GROUP PLAN LIFE POLICIES 779407-10-001 & 779407-11-001;
GROUP PLAN LIFE POLICIES, 779407-10-001 & 779407-11-001;
TRUSTEES OF THE INTERIM HEALTH BENEFITS TRUST GROUP LIFE
PLAN; GROUP LIFE AND ACCIDENTAL DEATH AND
DISMEMBERMENT INSURANCE PLAN
Defendants-Appellees
Appeal from the United States District Court
for the Southern District of Texas, Houston
Before JONES, Chief Judge, and BENAVIDES and STEWART, Circuit Judges.
EDITH H. JONES, Chief Judge:
This appeal addresses whether, under ERISA § 502(a)(3), 29 U.S.C.
§ 1132(a)(3), “other appropriate equitable relief” permits recovery of extra-
contractual, or “make-whole,” damages in the form of payment of life insurance
benefits that would have accrued to a plan beneficiary but for a plan fiduciary’s
No. 06-20346
breach of fiduciary duty. Constrained by the Supreme Court’s decision in Great-
West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708
(2002), we must deny relief.
I. BACKGROUND
During Mr. Amschwand’s medical leave for a bout with cancer that he did
not survive, his employer Spherion switched insurance companies, replacing
Prudential with Aetna Life Insurance Company (“Aetna”) as the new provider
of basic and supplemental life insurance benefits under the company Plan. A
“special provision” of Aetna’s group insurance policy covering Spherion
employees was entitled the “Active Work Rule” and provided:
If the employee is ill or injured and away from work on the date any
of his or her Employee Coverage (or any increase in such coverage)
would become effective, the effective date of coverage (or increase)
will be held up until the date he or she goes back to work for one full
day.
This provision was expressly noted in the “Summary of Coverage” Aetna
prepared for Spherion employees.1 As part of the transition to the new policy,
Aetna and Spherion agreed that the Active Work Rule requirement would be
waived for employees like Mr. Amschwand, who were not currently working full-
time due to a medical condition that antedated the switch from Prudential to
Aetna. For reasons Spherion has failed to explain, however, Mr. Amschwand
was not among those who received coverage despite being on disability leave
when the Policy took effect on May 1, 2000. Unlike other similarly situated
employees, Mr. Amschwand never received a waiver and, unbeknownst to him,
he remained subject to the Active Work Rule.
1
The Summary of Coverage provision stated: “Active Work Rule: If you happen to be
ill or injured and away from work on the date your coverage would take effect, the coverage
will not take effect until you return to full-time work for one full day. This rule also applies
to an increase in your coverage.”
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Spherion, an ERISA fiduciary and plan administrator, notified its
employees that they could elect to participate in the Aetna Plan during an “open
enrollment” period, which commenced in March 2000. Mr. Amschwand duly
enrolled and was informed by Spherion that he could maintain his existing
$248,000 basic coverage and his $142,000 level of supplemental coverage under
the Policy. On November 6, 2000, a representative of Spherion’s Human
Resources Department orally confirmed to Mr. Amschwand that all of his life
insurance was convertible under the Policy and that he remained eligible for all
benefits.
As his condition deteriorated, Mr. Amschwand repeatedly contacted
Spherion to confirm that he was fully covered under the Aetna Policy. Each
time, Spherion representatives failed to mention the Active Work Rule
requirement and incorrectly assured him that the full spectrum of coverage he
enjoyed under the pre-Aetna Plan remained valid. Moreover, in spite of the
Amschwands’ repeated oral requests for documentation of the Policy terms and
the corresponding Summary of Coverage, Spherion either maintained that
informational booklets were not yet available for employees, or simply failed to
provide any paperwork describing the conditions of the Policy. Believing himself
covered, Mr. Amschwand timely paid the basic and supplemental life insurance
premiums while on disability leave until his death in February, 2001.
Mr. Amschwand diligently sought to ensure that his wife would be provided for
under the Plan. Both parties agree, however, that Spherion never informed him
that in order for the Policy to take effect he was required to return to work for
at least one full day.
Shortly after her husband’s death, Mrs. Amschwand filed a claim with
Aetna only to be informed that because her husband had not satisfied the Active
Work Rule, he was ineligible for benefits under the Policy. After being denied
recovery in Aetna’s administrative appeals process, Mrs. Amschwand filed suit
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No. 06-20346
seeking relief under ERISA § 502(a)(3) in the form of “monetary losses caused
by [the Spherion Defendants’] breach of fiduciary duty.”2 That is, Amschwand
sought the equivalent of the combined life insurance benefits that she would
have received if her husband had complied with the Active Work Rule. Spherion
refunded the premium payments but maintained that the additional demand for
money damages did not constitute “appropriate equitable relief” within the
meaning of subsection (a)(3). The district court agreed, granting summary
judgment for Spherion. The court also dismissed as moot a third-party
complaint filed by Aetna. Amschwand appeals.
II. STANDARD OF REVIEW
This court reviews the district court’s summary-judgment grant de novo,
applying the same standard used below. Chacko v. Sabre, Inc., 473 F.3d 604,
609 (5th Cir. 2006). Summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” FED. R. CIV.
P. 56(c).
III. DISCUSSION
Section 502(a)(3) allows a plan participant, beneficiary, or fiduciary to
obtain, inter alia, “appropriate equitable relief” to enforce the terms or to remedy
violations of an employee-benefit plan. The scope and nature of relief available
to aggrieved parties under this statutory provision has been circumscribed by a
line of Supreme Court decisions beginning with Mertens v. Hewitt Associates,
508 U.S. 248, 113 S. Ct. 2063 (1993). Analyzing the remedies that were
2
Amschwand already has recovered statutory damages in the amount of $100 per day
from the date of Spherion’s failure to timely provide policy documentation, as well as attorney’s
fees, pursuant to ERISA §§ 502(c)(1)(B) and (g)(1), 29 U.S.C. §§ 1132(c)(1)(B), (g)(1),
respectively. The present appeal concerns only the availability of a monetary remedy under
§ 502(a)(3).
4
No. 06-20346
historically available in courts of equity, the Court in Mertens held that
§ 502(a)(3) did not authorize a suit for monetary damages against a nonfiduciary
that participated in the plan fiduciary’s breach of duty. Despite the fact that
monetary damages were among the remedies historically granted by pre-fusion
equity courts in actions brought by a beneficiary against a trustee, the Court
reasoned that consequential damages were a legal rather than equitable remedy
and denied relief. Id. at 255-56, 113 S. Ct. at 2068-69. Justice Scalia supported
this conclusion by acknowledging that in trust disputes a court sitting in equity
could routinely establish “purely legal rights and grant legal remedies”
otherwise beyond its equitable jurisdiction. Id. at 256, 113 S. Ct. at 2068; see
also GEORGE GLEASON BOGERT & GEORGE TAYLOR BOGERT, THE LAW OF TRUSTS
AND TRUSTEES, § 870 (rev. 2d ed. 1995). Congress’s use of the term “equitable”
in subsection (a)(3), therefore, was construed to encompass only categories of
relief “typically available in equity,” like injunction, mandamus, or restitution.
Id. at 256, 113 S. Ct. at 2069. Had Congress intended subsection (a)(3) to
authorize the panoply of legal remedies sometimes awarded by equity courts, the
term “equitable” would become superfluous. Id. at 257-58, 113 S. Ct. at 2069-70;
see also LaRue v. DeWolff, Boberg & Assocs., Inc., 450 F.3d 570, 574 (4th Cir.
2006), cert. granted, ____ U.S. ____, 127 S. Ct. 2971 (2007). (“[E]quitable relief
connotes only a subset of the full palliative spectrum.”) (citation and internal
quotation marks omitted). Money damages, Mertens concluded, were the “classic
form of legal relief” and thus not a “typically equitable” remedy available under
§ 502(a)(3). 508 U.S. at 255, 113 S. Ct. at 2068.3
3
This court has held similarly. See Rogers v. Hartford Life & Accident Ins. Co.,
167 F.3d 933, 944 (5th Cir. 1999) (noting that § 502(a)(3) excludes “extra-contractual,” “make-
whole,” and “compensatory” damages); Weir v. Federal Asset Disposition Ass’n, 123 F.3d 281,
290 (5th Cir. 1997) (no compensatory or punitive damages available under § 502(a)(3) against
a fiduciary in her individual capacity).
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No. 06-20346
The spectrum of § 502(a)(3) relief contracted further in Great-West Life &
Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708 (2002). Great-
West, a nonfiduciary insurance company, sought an injunction for money
damages as restitution against a plan beneficiary, who had violated the plan’s
subrogation clause by failing to reimburse Great-West for his tort recovery in a
lawsuit. Although restitution was mentioned in Mertens as “typically equitable,”
relief, Justice Scalia clarified in Great-West that “not all relief falling under the
rubric of restitution is available in equity.” 534 U.S. at 212, 122 S. Ct. at 714.
The crucial distinction between two historical species of restitution is that
equitable restitution seeks only to restore to the plaintiff particular funds or
property in the defendant’s possession, while legal restitution imposed personal
liability for breach of a legal duty. Great-West ultimately reaffirms the Mertens
requirement that the nature of the relief sought under § 502(a)(3) be “typically
equitable”; it adds a second requirement that the cause of action giving rise to
the claim be generically equitable as well. Great-West’s desired relief was not
“equitable” within this interpretation of § 502(a)(3) because under California law
a constructive trust or equitable lien cannot be established over funds or
property not within a defendant’s control.
The freshest of Mertens’s progeny, Sereboff v. Mid Atlantic Medical
Services, Inc., ____ U.S. ____, 126 S. Ct. 1869 (2006), reinforces the two-part
equity test. In Sereboff, an injured beneficiary who recovered a tort settlement
was sued by the plan fiduciary to recoup medical expenses it had paid on the
beneficiary’s behalf. But in contrast to Great-West, the Sereboff beneficiaries
retained possession and control of the particular settlement funds that the
fiduciary sought. Accordingly, the Supreme Court held that the relief sought by
the fiduciary would have been recognized as equitable by a pre-fusion equity
court and was subject to the restitutionary remedy of an equitable lien on the
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No. 06-20346
settlement funds. See Sereboff, ____ U.S. ____, 126 S. Ct. at 1874-75. Sereboff
seems to confirm that the sine qua non of restitutionary recovery available under
§ 502(a)(3) is a defendant’s possession of the disputed res. See, e.g., Coan v.
Kaufman, 457 F.3d 250, 264 (2d Cir. 2006) (restitutionary relief is deprived of
its equitable character for purposes of § 502(a)(3) “when, as here, the defendants
never possessed the funds in question and thus were not unjustly enriched”)
(citation and internal quotation marks omitted); Knieriem v. Group Health Plan,
Inc., 434 F.3d 1058, 1063 (8th Cir. 2006); Callery v. United States Life Ins. Co.,
392 F.3d 401, 406 (10th Cir. 2004); Bast v. Prudential Ins. Co. of Am., 150 F.3d
1003, 1011 (9th Cir. 1998).
This appeal, in contrast to the Supreme Court cases, is a suit by a
beneficiary seeking relief under § 502(a)(3) from a plan fiduciary for breach of
fiduciary duty.4 Amschwand places great weight on the distinguishing fact that
Spherion’s fiduciary status is “critical because, in courts of equity, make-whole
relief was routinely available as a remedy for breach of fiduciary duty in cases
brought against fiduciaries.” Echoing the methodology of Justice Ginsburg’s
dissenting opinion in Great-West (a rationale resurrected in her concurrence in
Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S. Ct. 2488 (2004)), Amschwand
argues that the district court misconstrued Mertens and Great-West, which
narrowly held that extracontractual damages against nonfiduciaries are not
equitable relief cognizable under § 502(a)(3). Against a fiduciary like Spherion,
4
As the pleadings demonstrate, this action can alternatively be characterized as a
demand for damages from the breach of Thomas Amschwand’s life insurance policy. Contrary
to Spherion’s insistence, breach of contract, although historically not an action brought in
equity, does not put equitable recovery under § 502(a)(3) out of Amschwand’s reach. See
Sereboff, ____ U.S. ____, 126 S. Ct. at 1874 (“ERISA provides for equitable remedies to enforce
plan terms, so the fact that the action involves a breach of contract can hardly be enough to
prove relief is not equitable; that would make § 502(a)(3)(B)(ii) an empty promise.”).
7
No. 06-20346
however, money damages are available under § 502(a)(3) because such a claim
would have entitled her to equitable restitution in the pre-fusion equity courts.
Anschwand’s proposed distinction among defendants has been rejected by
many of our sister circuits. There is no textual argument for drawing this
distinction under § 502(a)(3). Under Great-West, only the nature of the claim
and the relief sought – not the status of the litigants – determine the scope of
available § 502(a)(3) recovery.5 See, e.g., Callery, 392 F.3d at 409; McLeod v. Or.
Lithoprint Inc., 102 F.3d 376, 378 (9th Cir. 1996) (“the status of the defendant,
whether fiduciary or nonfiduciary, does not affect the question whether damages
constitute ‘appropriate equitable relief’” under § 502(a)(3)). That wider relief
was traditionally available in equity courts against fiduciaries than
nonfiduciaries is irrelevant to ERISA’s remedial scheme. Mertens and its
progeny state that § 502(a)(3) relief is affirmatively not grounded in “the special
equity-court powers available to trusts.” Great-West, 534 U.S. at 219, 122 S. Ct.
at 718; Mertens, 508 U.S. at 258, 113 S. Ct. at 2070; see also Crosby v. Bowater
Inc. Ret. Plan for Salaried Employees of Great N. Paper Inc., 382 F.3d 587, 596
(6th Cir. 2004).
Amschwand further repeats the unsuccessful argument that because
monetary damages for breach of fiduciary duty were sometimes awarded against
trustees in courts of equity, they are automatically available under § 502(a)(3).
See, e.g., Davila, 542 U.S. at 223-24, 124 S. Ct. at 2504 (Ginsburg, J., concurring)
(arguing that ERISA imports general trust principles recognized by equity
courts). Mertens, however, held that even if breach of fiduciary duty is a
generically equitable claim, the remedy sought — here, restitution — must have
5
On its face, § 502(a)(3) defines who may bring an action; it does not condition the scope
of recovery on the identity of the defendant. This is not true of other ERISA remedial
provisions. See, e.g., Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot
& Wansbrough, 354 F.3d 348, 352 & 353 n.13 (5th Cir. 2003) (citing statutory sections).
8
No. 06-20346
been one typically awarded, not one that could have been awarded, by a court of
equity. The species of restitutionary relief sought by Amschwand here does not
qualify as a “typically equitable” remedy under Great-West. Spherion never
maintained possession of Amschwand’s insurance proceeds, yet possession is the
key to awarding equitable restitution in the form of a constructive trust or
equitable lien. In contrast, Amschwand seeks relief – whether characterized as
make-whole or restitutionary – that is legal in nature because it represents
damages on the insurance contract that Spherion allegedly breached.6 See
LaRue, 450 F.3d at 575 (“absence of unjust possession is fatal to an equitable
restitution claim”); Bauhaus USA, Inc. v. Copeland, 292 F.3d 439, 445 (5th Cir.
2002) (no § 502(a)(3) recovery because settlement proceeds were in the registry
of the Mississippi chancery court, not under the defendant’s control). Stated
otherwise, even were we to find that Amschwand’s cause of action sounds in
equity, her desired relief is not typically equitable.
A defendant’s possession of the disputed res is central to the notion of a
restitutionary remedy, which was conceived not to assuage a plaintiff’s loss, but
to eliminate a defendant’s gain. See, e.g., Great-West, 534 U.S. at 229, 122 S. Ct.
at 723 (Ginsburg, J., dissenting); Bombardier Aerospace Employee Welfare
Benefits Plan v. Ferrer, Poirot & Wainsbrough, 354 F.3d 348, 355-56 (5th Cir.
2003). The Courts of Appeals have widely adopted this reasoning. See, e.g.,
LaRue, 450 F.3d at 576 (value of a plaintiff’s loss is a “measure that is
traditionally legal, not equitable”); Coan, 457 F.3d at 264 (restitutionary
remedies are based upon a defendant’s gain); Callery, 392 F.3d at 406 (same);
6
Cf. Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 309 n.20 (5th Cir. 2007) (legal
restitution is not a remedy cognizable under § 502(a)(3)); Coan, 457 F.3d at 264 (attempted
recovery of funds allegedly dissipated by fiduciary’s mismanagement of a 401(k) plan not
actionable under § 502(a)(3)); Callery, 392 F.3d at 406 (attempted recovery of life insurance
benefits by plan beneficiary who alleged breach of fiduciary duty not cognizable under
§ 502(a)(3)).
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No. 06-20346
Bast, 150 F.3d at 1011 (defendant’s “ill-gotten profit” is integral to equitable
restitutionary remedies). Thus, if Spherion breached its fiduciary duty to
Mr. Amschwand, the appropriate equitable remedy is the disgorgement of
Spherion’s ill-gotten profits, i.e., refund of the policy premiums. See Lind v.
Aetna Health, Inc., 466 F.3d 1195, 1200-01 (10th Cir. 2006) (citing Callery,
392 F.3d at 406); Helfrich v. PNC Bank, Ky., Inc., 267 F.3d 477, 481 (6th Cir.
2001); Kerr v. Charles F. Vatterott & Co., 184 F.3d 938, 944-45 (8th Cir. 1999).
Obtaining the lost policy proceeds, as Amschwand requests, is simply a
form of make-whole damages.7 Cf. Coan, 457 F.3d at 264; Callery, 392 F.3d at
406. This demand is not equitable in derivation, but is akin to the legal
remedies of extracontractual or compensatory damages. See GEORGE GLEASON
BOGERT & GEORGE TAYLOR BOGERT, THE LAW OF TRUSTS AND TRUSTEES § 870
(rev. 2d ed. 1995) (payment of a sum due under the trust or damages for a
trustee’s wrongful act are legal remedies occasionally granted by an equity
court); RESTATEMENT (SECOND) OF TRUSTS § 198(1) (1959) (enforcement of
trustee’s duty to pay money was an action at law).8 In contrast to the make-
whole damages sought here, equitable restitution was designed to restore the
trust res damaged by a trustee’s breach of duty; it did not aim to compensate a
7
Amschwand’s alternative characterization of the remedy she seeks under § 502(a)(3)
as injunctive relief that would preclude Spherion’s withholding payment of the make-whole
damages is essentially indistinguishable from a demand for payment. Such attempts to
recharacterize a desired § 502(a)(3) remedy as a purely equitable form of relief, like an
injunction, have been consistently rejected. See Great-West, 534 U.S. at 210-11, 122 S. Ct. at
713; Mertens, 508 U.S. at 255; 113 S. Ct. at 2068; Bowen v. Massachusetts, 487 U.S. 879, 915-
16, 108 S. Ct. 2722, 2743 (1988) (Scalia, J., dissenting); Eichorn v. AT&T Corp., 484 F.3d 644,
655 (3d Cir. 2007); Callery, 392 F.3d at 405.
8
This court has explicitly rejected language from our pre-Mertens decisions which
speculates that such relief could be available under § 502(a)(3). See, e.g., Rogers, 167 F.3d at
944, recognizing abrogation of Corcoran v. United Healthcare, Inc., 965 F.2d 1321 (5th Cir.
1992) (“Although our decision in Corcoran may have ‘left the door open’ to the possibility of
recovering certain extra-contractual damages necessary to make a plaintiff whole, the Supreme
Court firmly closed this door in Mertens.”).
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No. 06-20346
beneficiary for expected gains that would have accrued absent a fiduciary’s
breach. See RESTATEMENT (SECOND) OF TRUSTS § 205 (1959). Because the
remedy sought here was not typically available in pre-fusion courts of equity, we
are obliged to follow the Supreme Court’s decision in Great-West and deny
§ 502(a)(3) relief.
IV. CONCLUSION
For the aforementioned reasons, the judgment of the district court is
AFFIRMED.
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No. 06-20346
BENAVIDES, Circuit Judge, specially concurring:
The facts as detailed in Chief Judge Jones’s opinion scream out for a
remedy beyond the simple return of premiums. Regrettably, under existing law
it is not available. I am constrained to join the court’s opinion, which I find
correctly applies controlling precedent.
12